Video transcript

Central to the strategy is Electronic Design Engineering – an attractive market which offers above average gross margin and growth rates, values our proposition, and where customers have the potential to buy more lines per order than other parts of the market.

The global EDE market consists of customers involved in the design of electronic products and components and is estimated at circa £15 billion worldwide. EDE customers have similar service requirements wherever they are located around the world – these include a broad product offering, technical support and reliable and prompt delivery.

Electronics continue to pervade all aspects of our lives, driven by aesthetics, size, functionality, legislation and the environment. Even in recession, key industries like medical and biometric security are forecast to grow, and while volume production in areas like motor and consumer electronics may decline, the number of design projects is forecast to be less affected than production volume.

While our intelligence leads us to believe that MRO will decline over the coming months we still believe that EDE will grow and is driven by key geographies and segments. That, combined with our low market share and strong customer acquisition programmes offer potential topline growth.

In our key emerging territories we saw strong growth driven by these customer acquisition programmes (see “internationalising our model“). An important part of the proposition is the product range that we offer to EDEs. At the beginning of our strategy, we announced that we intended to add approximately 70,000 products to our current stocked range with a further 50,000 lines to be available on demand. We have made good progress this year and have added over 90,000 new products (before deletions) into stock and have made further available on an as needed basis.

We have set as a goal for this part of our strategy that 50% of MDD revenue will come from EDE customers by the end of financial year 2010 and remain committed to that goal even in the current climate.

This part of our strategy is intended to provide design engineers and purchasing professionals with a fast and efficient channel to access the holistic solutions that they seek – combining access to products, information and technical support.

The web is increasingly the preferred channel for EDE customers and as well as offering them an efficient solution, it is how they interact with the broader technical community.

It also offers Premier Farnell a lower cost to serve channel compared with more traditional sales channels. We clearly recognise the importance of this in the current climate and have programmes in place to enhance our web further and accelerate its adoption by our customers. Our aim is to provide excellence in e-com solutions that don’t just benefit us in terms of efficiency, but also offer our customers unique benefits. In 2008, two key initiatives were launched online – iBuy offering purchase controls to procurement professionals, and eQuotes offering US customers the chance to request and pick up quotations via the website.

This part of our strategy is a key element of our multi-channel end to end customer experience plan, which includes both our EDE and our MRO customer base.

We set a goal for this part of the strategy that 50%–70% of our MDD revenue will be via eCommerce by the end of financial year 2010. We are now achieving 32.0% of sales via eCommerce channels and some regions are already trading over 65%.

Despite this period of deep recession, China, India and much of Eastern Europe are among the few areas still forecast to achieve overall market growth, with China in particular already committed to major government investment to maintain economic growth.

The Chinese market for small volume electronics is estimated at over £1 billion annually and growing at a rate faster than Chinese GDP. This market is highly fragmented, offering a significant growth opportunity and potential for us to achieve market leadership with the growing number of design engineers graduating from Chinese universities every year and engaging in design activities in their local industries.

Our Premier Electronics business in China continues to make good progress after its launching in 2007. The business is focused on the local design community supported by local inventory and next day delivery available in over 110 Chinese cities. Growth in 2009 was 39.4%, driven by strong customer acquisition programmes.

The expansion of the European Union and the highly fragmented nature of these new markets also offer growth opportunities. Our programme of expansion into Eastern Europe has progressed strongly and showed growth of 68.4% with a clear focus on customer acquisition, EDE and the web – five local language websites were launched in the region during the year with a number of additional planned. We also successfully completed the acquisition of the end user business of our former distributor in Poland, Hungary and the Czech Republic – Microdis – further driving growth in the region.

In January 2008, we successfully completed the acquisition of the high service distribution business of Hynetic Electronics in India. This business, which had sold the Farnell product range for over six years as a distributor, has offices in nine locations across the country, its own localised Farnell website and a local catalogue for the Indian market.

In 2009, 17.6% of our MDD revenue came from developing markets, making good progress towards our stated goal of 20%.